World Economic Forum Points to Four Top Global Risks

The World Economic Forum's Global Risks Report for 2018 has been released, covering more risks than ever, but focusing in particular on four key areas: environmental degradation, cybersecurity breaches, economic strains and geopolitical tensions. 

Each year the Global Risks Report works with experts and decision-makers across the world to identify and analyze the most pressing risks that the world faces. As the pace of change accelerates, and as risk interconnections deepen, this year’s report highlights the growing strain human activities are placing on many of the global systems vital for survival. Among the most pressing environmental challenges are extreme weather events and temperatures; accelerating biodiversity loss; pollution of air, soil and water; failures of climate-change mitigation and adaptation; and transition risks as the world moves to a low-carbon future.

In 2016 alone, 357 million new malware variants were released and “banking trojans” designed to steal account login details could be purchased for as little as $500. The report states that cyber breaches recorded by businesses have almost doubled in five years, from 68 per business in 2012 to 130 per business in 2017. The cost of cybercrime to businesses over the next five years is expected to be $8 trillion.

The report is published at a time of encouraging headline global growth, but says the World Economic Forum, any breathing space this offers to leaders should not be squandered: the urgency of facing up to systemic challenges has intensified over the past year amid proliferating signs of uncertainty, instability and fragility.

“Headline economic indicators suggest the world is finally getting back on track after the global crisis that erupted 10 years ago, but this upbeat picture masks continuing underlying concerns. The global economy faces a mix of long-standing vulnerabilities and newer threats that have emerged or evolved in the years since the crisis. The familiar risks include potentially unsustainable asset prices, with the world now eight years into a bull run, elevated indebtedness, particularly in China, and continuing strains in the global financial system.”

Among the newer challenges are limited policy firepower in the event of a new crisis; disruptions caused by intensifying patterns of automation and digitalization; and a build-up of mercantilist and protectionist pressures against a backdrop of rising nationalist and populist politics.

The 2018 report presents the results of the latest Global Risks Perception Survey, in which nearly 1,000 experts and decision-makers assess the likelihood and impact of 30 global risks over a 10-year horizon. Over this medium-term period, environmental and cyber risks predominate. However, the survey also highlights elevated levels of concern about risk trajectories in 2018, particularly in relation to geopolitical tensions.

The world has moved into a new and unsettling geopolitical phase, states the report. Multilateral rules-based approaches have been fraying. Re-establishing the state as the primary locus of power and legitimacy has become an increasingly attractive strategy for many countries, but one that leaves many smaller states squeezed as the geopolitical sands shift. 

“There is currently no sign that norms and institutions exist towards which the world’s major powers might converge. This creates new risks and uncertainties: rising military tensions, economic and commercial disruptions, and destabilizing feedback loops between changing global conditions and countries’ domestic political conditions. International relations now play out in increasingly diverse ways. Beyond conventional military buildups, these include new cyber sources of hard and soft power, reconfigured trade and investment links, proxy conflicts, changing alliance dynamics and potential flashpoints related to the global commons.” 

Identity politics could fuel geopolitical as well as domestic risks, states the report. “Charismatic strongman politics is on the rise across the world. In addition to the “America First” platform of U.S. President Donald Trump, variations on this theme can be seen in numerous countries from China to Japan, Russia, Turkey, Saudi Arabia, the Philippines and elsewhere. The trend towards increasingly personalized power takes place amid rising geopolitical volatility. The escalation of geopolitical risks was one of the most pronounced trends of 2017, particularly in Asia, where the North Korea crisis has arguably brought the world closer than it has been for decades to the possible use of nuclear weapons.

Geopolitical risks are exacerbated by the continuing decline in commitment to rules-based multilateralism. For example, in 2017, Trump delivered on some of his unilateralist campaign pledges, withdrawing the U.S. from both the Paris Agreement on climate change and the Trans-Pacific Partnership trade deal.